Australian PE firm Next Capital to acquire ASX-listed Silver Chef for $19m

Silver Chef photo from company's Facebook page.

Australian private equity firm Next Capital has agreed to take ASX-listed hospitality industry equipment provider Silver Chef private in a deal that values the latter at A$27 million ($19 million).

In a disclosure to the Australian Securities Exchange, Silver Chef said it has entered into a binding scheme implementation agreement (SIA) with a consortium led by Next Capital.

The consortium comprises investment vehicles affiliated with Next Capital and a number of co-investors, Silver Chef said.

Next Capital, a PE firm that specialises in providing buyout funding for small to medium growth businesses, will pay A$0.70 per share, representing a 126 per cent premium to Silver Chef stock’s last closing price.

The price, however, is 30 per cent lower than Next Capital’s previous offer in April of A$39 million ($27 million). Back then, Silver Chef had sought a sweetened deal from the private equity firm.

On July 2, Next Capital’s indicative, conditional, non-binding offer was revised to A$0.70 per share and one Contingent Value Note per share after completion of negotiations with Silver Chef’s financiers.

“Today’s announcement represents the culmination of extensive negotiations with Next Capital and the company’s financiers and takes into account the prospects facing the company in a constrained funding environment and the urgent need to cure the covenant breaches to ensure the ongoing support of the company’s financers,” Silver Chef said.

Silver Chef has been operating with the support of its financers since July 2018 as the company explored options to cure its covenant breaches, which required a minimum of A$45 million capital to reduce the amount drawn under the company’s Syndicated Debt Facility (SF).

The company’s independent directors have unanimously recommended voting in favour of the scheme in the absence of a superior proposal emerging.

“The independent directors have carefully considered the offer from Next Capital and its relative certainty compared to the existing challenges in raising sufficient debt and/or equity to cure breaches of debt covenants,” said Sophie Mitchell, chair of the Independent Board Committee.

Silver Chef, established in 1986, focuses on rentals of commercial equipment to small and medium enterprises. It has operations in Australia, New Zealand, and Canada.

Next Capital, the leader of the consortium taking Silver Chef private, was established in 2005 by founding partners Sandy Lockhart, Patrick Elliott, and John White, all former principals of Macquarie Bank’s private equity division, Macquarie Direct Investment (MDI).

In January, Next Capital announced that it was acquiring a 100 per cent interest in NZ Bus business (NZ Bus) from Infratil Limited, a New Zealand-based infrastructure and energy investment group, for an estimated $218 million to $240 million.